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Compute taxable income and income tax payable for 2007




P19-3B The following information has been obtained for the Kerdyk Corporation.;1. Prior to 2006, taxable income and pretax financial income were identical.;2. Pretax financial income is $1,700,000 in 2006 and $1,400,000 in 2007.;3. On January 1, 2006, equipment costing $1,500,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes (Hint: Use the half-year convention for the straight-line method used for tax purposes.);4. Interest of $60,000 was earned on tax-exempt municipal obligations in 2007.;5. Included in 2007 pretax financial income is an extraordinary gain of $200,000, which is fully taxable.;6. The tax rate is 35% for all periods.;7. Taxable income is expected in all future years.;Instructions;(a) Compute taxable income and income tax payable for 2007.;(b) Prepare the journal entry to record 2007 income tax expense, income tax payable, and deferred taxes.;(c) Prepare the bottom portion of Kerdyk?s 2007 income statement, beginning with ?Income before income taxes and extraordinary item.?;(d) Indicate how deferred income taxes should be presented on the December 31, 2007, balance sheet.


Paper#23655 | Written in 18-Jul-2015

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